AARP is asking for help in fighting a water rate case before the Arizona Corporation Commission that, if approved, could set a dangerous precedent for other utilities moving forward.
There are two cases to which AARP is hoping to draw attention: the Pima Utility Company and Johnson Utilities rate cases. Although neither have a direct effect on the West Valley, AARP of Arizona Director of Communications Cynthia Fagyas said if the settlement is approved it could mean similar deals all over the state.
“The implications are great,” she said. “This will affect ratepayers everywhere.”
In those cases, the companies and the Residential Utilities Consumer Office negotiated a settlement that allows the company’s income taxes to be incorporated into the bill sent to ratepayers. Those taxes would be verified by an unidentified certified public accountant as being less than the host water companies actually pay but the identity of the CPA is not disclosed and neither are the figures they used to arrive at a number.
AARP Director of Advocacy Steve Jennings said the settlement would apply to S corporations and LLCs.
“The owners of these water companies have told the ACC they would like to add their capital gains taxes to the rate case,” he said. “Now, APS and other types of companies outside of S and LLC don’t get this deal but if the ACC were to grant this then why wouldn’t the shareholders of other types of corporations pursue it? They will say this is inequitable and demand the same deal. That’s how we see this spreading.”
Jennings said the ACC voted 4-1 to approve the deal already, with Brenda Burns the lone dissenter. RUCO later asked for a re-hearing on the subject and that case will be heard next week. Burns in her dissent said she felt the proposal was bad policy, and Jennings said AARP agrees.
“It’s an old game in utility rate cases to try to get personal expenses built into rate base,” he said. “We don’t think customers should have to pay the personal taxes of the owners.”
Jennings said utility rate cases and the proper regulating of monopolies can only work with complete transparency and the proposed deal would serve the opposite purpose.
“The proposed settlements negotiated by RUCO would charge water ratepayers for taxes owed by their utility company owners, even though the Arizona Corporation Commission would have no proof of what taxes were actually paid,” Jennings said. “That’s not fair to charge ratepayers for costs not actually revealed or examined in the rate-setting process. Finally, the proposed settlement agreements attempt to avoid, by private review, the public scrutiny of the Corporation Commission under its constitutional obligations to determine fair and reasonable rates in the ratemaking process.”
Jennings further said that if the utility companies really want these taxes built into the rates they should open up about what their taxes are.
“What is being proposed in these settlements is unlike other ACC rate settings,” Jennings said. “Utility rates are set when the costs of providing utility service are revealed and open to the public. If the owners of these water companies want the ratepayers to pay their personal income taxes they should be willing and required to reveal what taxes they actually pay. These proposed settlements would create a new kind of utility rate setting — a bad kind where unrevealed costs are assessed to ratepayers. That’s why AARP opposes this settlement and asks the ACC to reconsider their initial decisions.”
Jennings and Fagyas said they are encouraging people to contact the Arizona Corporation Commission and voice their displeasure with the proposal.
“The folks at the ACC, they listen to us,” Fagyas said. “When our members talk, they listen. And we need people to call the ACC and tell them not to accept this proposal because if it is approved in this case all the other companies will likely follow suit.”
Contact information for each commissioner can be found online at www.azcc.gov.
Jeff Dempsey may be reached at 623-876-2531 or firstname.lastname@example.org.